I wrote this book with the goal of helping others.  The book was almost an obsession. I had intended it be sold in stores. This book consumed seven years of my life.

But then I met a lot of good people on the Internet. I became friends with all of you. And finally, instead of making a few dollars for myself, I have decided that I would rather help my friends. Almost every person you know will buy a car sooner or later. And so probably will you. This book is designed to save you a lot of money. If it does, all I ask, is that you take a little of what you have saved and use it to bring a little happiness into someone else's life.

ABOUT THE BADDTEDDY BUYERS GUIDE FOR NEW AND USED CARS

This book is a step by step process designed to assist you in obtaining a bottom-line deal on every purchase of a new or used vehicle.

NO HAGGLING

This book does not teach the art of haggling or theory of negotiations. Instead, it teaches you how to find the dealer's bottom-line. If you know the bottom-line, there is little or no need to negotiate.

IT'S AS EASY AS FILL IN THE BLANK

This book is divided into sections. Within each section are subject areas to explain a specific aspect of the purchase process. At the end of each section is a worksheet or purchase offer. Fill in the blanks according to the instructions and when you finish this book the result will be a written purchase offer that you can hand to the salesperson and say with confidence, "This is my final offer."

TRADE-IN

This section will teach you how to receive more money for your trade-in by appraising your trade-in, and evaluating your trade equity. It will also show how to receive refunds on credit life insurance and extended warranties on the vehicle you are trading-in or selling.

USED CARS

This section teaches you how to find the dealers cost on used cars, figure trade allowances, and how to find the lowest price at which a dealer is willing to sell. Includes the "Used Car Purchase Offer."

NEW CARS

This section will help you find the dealers cost on new cars, factory options, dealer extras, plus helpful information on rebates, trade allowances and sales tax. Take the completed "New Car Purchase Offer Form" to the dealer and let it do the negotiating for you.

FINANCE

This section explains dealer doc fees, warranties, credit life insurance, types of loans and interest rates. Includes the "Finance Purchase Offer".

CREDIT

This section includes advice on improving credit ratings, lowering interest rates and includes a "Credit Application Form".

PHONE NUMBERS

This section lists important phone numbers that can help you "before" and "after" the purchase.

BEWARE OF FALSE REFUND GUARANTEES

Very few dealers will allow you to return a vehicle for a full cash refund. Some offer a refund "credit" or allow you to trade-in the vehicle, but these "may" actually end up costing you even more money if you return the vehicle. The dealer already made a profit on the first vehicle and now they get a chance to make an additional profit by "selling" you a replacement vehicle.

DON'T BELIEVE EVERYTHING YOU SEE OR HEAR IN ADVERTISEMENTS

Dealer advertisements are full of small print and the dealer may leave out information accidentally or intentionally. Often the "low payments" do not include the sales tax, destination, tags, title, doc fees, appearance package, etc. Additionally, they may be using rebates you do not qualify for such as; "First Time Buyer", "Recent College Graduate", "Military", "Factory Employee", etc... Even if it says "No Money Down", it may be a lease in which case you may be required to pay the first month, the last month, a security deposit, taxes, capitalized cost reduction, acquisition fees, etc...

DON'T WAIT FOR SALES

Sales are a gimmick. Dealer advertisements during a sale proclaim that they are now offering the lowest "Blow-Out" prices in the whole world. Don't believe it! Normally during a sale the dealer's cost remains the same as any other time. Since the dealer's cost doesn't change, the lowest price at which the dealer can afford to sell at does not change. If you take the time to research the dealers cost, you should be able to get the best deal at any time, without waiting for a "sale".

A GOOD TIME TO BUY

However, it should be noted that salespeople and sales managers, hoping for a "bigger month end bonus check", may be more eager to make you a slightly better deal during the last five days of the month. The dealer's cost doesn't go down, but the amount of time that it takes a "bonus-minded" manager to agree to the deal may be shorter.

WHERE TO BUY

Today's market offers many choices such as the traditional new and used car dealers, no-negotiate one price dealers, brokers, credit unions, club discount membership programs, for sale by individuals, and you can even buy via the Internet. All of them offering promises of the best no hassle deal. Who should you trust? The answer is simple, trust no one. Instead, fill out the purchase offer included in this book to find the bottom-line price. No matter who the seller is: If they are willing to sell at or below the bottom line price on the purchase offer, buy the car. If they won't, go somewhere else.

Before looking at new cars it is important to decide how much you can afford to spend.

BEGIN BY FIGURING YOUR OWN PERSONAL HOME BUDGET

Sit down at home and figure your monthly bills and expenditures. Allow for emergencies, changes in jobs, medical, entertainment, rent/mortgage, utilities, loans, credit cards, increases in family size, food, laundry, retirement, etc... Then allow for the unexpected and a margin for error.

Take into consideration possible increases in car insurance premiums and fuel usage in addition to the monthly car payments.

The remainder is the "maximum amount" that you can reasonably afford to spend on a new car. Be conservative. Make allowances for future emergencies and possible changes in income. Decide on a maximum amount you are willing to spend. Don't let the salesperson, your emotions, or the excitement of a new car guide you. Decide on this figure at home, before you go into negotiations, and stick to it.

When deciding how much you can spend on a car, allow for sales tax, license plate fees, down payment, trade-in equity or inequity, rebates and possible discounts.

PAYMENT GUIDELINE

Use the following payment guideline as a reference tool to decide on a price range that is within your budget. Payments are approximate and due to fluctuations in interest rates actual payments may be slightly higher or lower. You will figure your actual monthly payments in the chapters that follow.

Most banks charge higher interest rates for longer term loans. Extending the term of the loan may cost hundreds or even thousands of dollars extra. Save money by taking a shorter term loan.

Amount          36 mo             48 mo                 60 mo
Financed         8% APR          9% APR         10% APR

$ 5,000         $155                $125                  $105

$10,000        $315                $250                  $210

$15,000        $470                $375                  $320

$20,000        $625                $510                  $425

$25,000        $785                $635                   $530

$30,000        $940                $760                   $640

Most consumers pay too much when buying a car because they do not "completely" understand the buying process and how to avoid dealer money traps.

HOW MUCH OF A DISCOUNT IS ENOUGH?

Most consumers realize that paying full window sticker price for a new car would be a big mistake. Unfortunately, they do not know the dealers cost. Therefore, their buying decision is often based on guessing at how much money they should be able to negotiate off the sticker price of a car.

"EVERY CUSTOMER" DEMANDS A BIG DISCOUNT

Car dealers know that "every" customer is expecting to negotiate. They know that most will not buy without "a big discount." So the dealer using psychology, starts out at a higher price so that consumers can negotiate a big discount and go home thinking that they have "outsmarted" the dealer and made an excellent buy.

"A GOOD DEAL IS A STATE OF MIND"

Although there are some honest car dealers, other less-than-honest dealers operate under the assumption that for the customer "a good deal is a state of mind". And that if they can make you "believe" you have negotiated an extra good deal, they can sell you a car. As a result, car sales has become one of the biggest con games ever.

GET AN EDUCATION IN CAR BUYING

The following story is designed to educate you about the car buying process. First you will learn how a car dealer can allow you several thousand dollars in "negotiated" discounts and still overcharge you.

.......ONCE UPON A TIME.......

Twin brothers, Little Johnny and BaddTeddy, bought identical new cars. They worked at the same job and they both had good credit. They had identical trade-ins of equal value. Everything was identical.

LITTLE JOHNNY

Little Johnny (John) was an average new car buyer and used the "haggling" method to negotiate what he considered a good deal (state of mind). As a result of John's hard work and stubbornness he received several thousand dollars worth of "negotiated" savings. (Little Johnny paid to much!)

BADD TEDDY

Badd Teddy (Teddy) on the other hand knew what he was doing. He researched the dealers cost, interest rates, insurance and had his trade-in appraised elsewhere before going in to negotiate. Teddy made an "informed decision" and saved far more money than John.

THE REAL DIFFERENCE

Even though John and Teddy bought identical cars, Teddy paid $7,000 less for his car. Don't believe it? Dear John, Read and learn!!!

John wanted the dealer to install an AM/FM/Cassette Radio in his new car.

The dealer inform John the price was $599.

John said this was too much.

After 30 minutes of dickering John and the salesman agreed on $400. The salesman said that they could sign the contracts that day and John would need to bring the car back the following week to have the radio installed.

Secretly, the salesman planned to wait until "after the contracts were signed" so he could install a cheap generic brand radio.

John Paid $400 and was very unhappy with the quality of his new radio.

Teddy wanted the dealer to install an AM/FM/Cassette radio in his new car.

Teddy called several companies that install radios. He asked specific questions about quality and price.

Teddy specified "in writing" that he wanted a BaddTunes Classic Jam Gold Series AM/FM/Cassette Radio with Digital Tuning and Clock, plus four 120 Watt Boomerang Subatomic Super Speakers.

Teddy verified the dealers cost in advance ($350) plus allowed the dealer a $25 profit for having the work done "before" Teddy took delivery of his new car.

Teddy paid $375 and completely enjoyed listening to BaddTeddy Wavs and Jams on his new stereo system.

JOHN                                                           TEDDY

11,800                                                             9,300
+ 400 Substandard Generic Radio                + 375 Quality Stereo System
12,200                                                             9,675

John wanted the dealer to install a sun roof.

The salesman told John the sun roof was $399.

John spent another hour haggling over price with the salesman and they finally agreed that for $300 the dealer would get the sun roof installed in John's new car the following week.

A week later the dealer installed a small, generic brand, non-removable sun roof in John's car. John was unhappy!

Teddy wanted the dealer to install a sun roof.

Teddy called several companies that specialize in installing sun roofs and asked specific questions about quality, size and price.

Teddy specified "in writing" to the dealer that he wanted them to have Sporty Tops install a large, removable, sun roof with dark tint.

Teddy paid the dealer's cost of $200, plus $25 dealer profit, for having the work done "before" Teddy took delivery.

JOHN                                                     TEDDY

12,200                                                      9, 675
+ 300 Small Generic Sun roof                   + 25 Large Removable Sun roof
12,500                                                       9,900

The Finance Manager suggested that John should protect his rather sizable investment.

He said that for less than the cost of a cup of coffee, 40 cents a day, that John could buy an Extended New car Warranty.

John said ok.

The Finance Manager conveniently forgot to inform John of the total cost of the warranty. There were nearly 2,000 days on the contract, at 40 cents a day.

Total cost of the warranty was $800.

Teddy asked the Finance Manager to show him the best Bumper to Bumper Extended Warranty available. He specified a warranty with "no deductibles"

Teddy then insisted on seeing the dealers cost book for the warranty. The dealers cost for the best warranty was $500.

Teddy knew the Finance Manager was a commissioned salesperson so he agreed to pay $100 over the dealers cost for the warranty.

Teddy bought the "best" warranty for $600.

JOHN                                                             TEDDY

12,000                                                                8,900
+ 800 Warranty (deductible)                               600 Best Warranty (No Deductible)
12,800 9,500

The Finance Manager told John that he could get John a Preferred Rate on Financing.

This of course sounded good to John who worried about every penny.

What the Finance Manager forgot to tell John was that a "Preferred Rate" was the interest rate the dealer preferred to charge him.

The Finance Manager secretly plans to charge John a high interest rate of 10.5% for 66 long months.

Teddy called all the local banks to find the lowest interest rate, "before" he went to the dealer. He turned down dealer financing because he was able to receive a lower interest rate from a local bank.

Teddy's rate was lower for three reasons
1. A smaller amount financed
2. A shorter term loan
3. No dealer profit on the financing

Teddy's interest rate was only 7% for a shorter 48 month period.

EPILOGUE

Two years later John and Teddy crashed into each other. John and Teddy were ok, but both Moonbeams were totaled. The insurance companies decided that the current market value of each car was $5000 and they sent a check to each of John and Teddy's banks.

The remaining balance on John's loan The remaining balance on Teddy's loan
after 24 payments was $9,656. after 24 payments was $5,588.

The insurance company sent John's The insurance company sent Eddie's
bank a check for $5,000. bank a check for $5,000.

$9,656 Balance Due Lender $ 5,588 Balance Due Lender
- 5,000 Insurance Check - 5,000 Insurance Check
$4,656 John owes lender 588 Teddy owes lender

REFUNDS

John owed $4,656 on a car that he no                  Teddy remembers reading that extended
longer owned.                                                        warranties and declining term life
                                                                               insurance policies are refundable on a
He was unaware that Credit Life insurance         a prorated basis.
policies and extended warranties were
partially refundable.                                                   Teddy's refunds totaled $600.

$588 Balance Due Lender
- 600 Refund
$4,656 John's Owes Lender                         $ 12 Eddie is Ahead

15

WHAT HAPPENED TO JOHN AND TEDDY?

John could not find a bank willing to loan           Teddy had no debt, good credit and $12
him enough money to buy a new car and            in his pocket.
pay-off the $4,656 loan on his old car.
                                                                               Teddy bought a new Moonbeam 2100 XTC
John had no car.                                                     and drives off into the sunset.

Since John's job required a car, John lost

his job. After John lost his job, he couldn't

pay his mortgage.  John lost his house.

John is forced to file bankruptcy, and
now the only thing John has to his name
is BAD CREDIT!

DO YOU WANT TO BE A JOHN OR TEDDY?

Everything in the "John and Teddy Story" is based on real car deals. John is an average consumer (some get much worse deals). Teddy is among the few consumers that actually gets a "bottom line" deal based on an "informed decision".

16

TRADE-IN: WHAT IS MY CAR WORTH

Many dealers make huge profits by "stealing the trade". These dealers try tricks such as false appraisal values, exaggerating the cost to repair damages, etc... to get you to accept less than your trade's true (wholesale) value. They know your car is worth more money. They are trying to get you to accept less so that they can make larger profits. Hence, the term "stealing the trade".

SELL YOUR VEHICLE AT RETAIL

Consider selling your vehicle yourself. If you trade the vehicle in, most dealers will only allow you wholesale value. However, if you sell the vehicle yourself you can ask retail. This can mean several hundred or possibly thousands of additional dollars in your pocket.

Have the vehicle thoroughly cleaned, washed and waxed, get the motor cleaned, check and fill fluids, etc... Clean vehicles attract buyers while dirty vehicles scare potential buyers away. If the vehicle is worth more than $1000 take it to a professional detail shop (Yellow Pages). Complete detailing costs less than $100 but can increase the retail value by several hundred dollars.

Never trade in a car without first calling your lender to verify the loan balance (if any). Unscrupulous dealers can steal hundreds, if not thousands, of dollars of your money by using a false loan payoff balance. This can done by several methods.

One way is telling you that your loan payoff is higher than it really is (dealer pockets the difference of up to several thousand dollars of your money) . Another way to take your money is for the dealer to confuse the buyer into believing that the payoff is same as the total of the remaining payments (The actual payoff may be much lower, because the payments include interest that you are not required to pay if you payoff the loan early). The easiest way is to get you to sign a blank payoff authorization form (which he later fills in with whatever numbers he wants).

There are two very easy things you can do to avoid getting ripped off. First, call the lender and verify the exact balance owed for the date that you wish to trade the car in. The second is to read the "payoff authorization form" and verify the payoff is correct. Never sign a blank form.

If you do trade a vehicle in at a dealership, you should be aware that you are entitled to full wholesale value. Wholesale is the market standard and the top dollar a dealer would pay for your car if he bought it at an auction or from another dealer. If you come prepared and show the dealer that you know the wholesale value of your trade-in, the dealer will realize you can't be bluffed and may decide not to waste time playing games.

Although many dealers will try offering less (negotiating), if you are firm and patient, most dealers will eventually give in. Dealers will full wholesale to an educated buyer because the dealer can still make a profit by selling your car at retail.

17

Be smart! Get an appraisal of your own. Start by calling used car managers at other dealers. Explain that you are not buying a vehicle at their dealership, but that you are willing to pay them $15 to $20 for an honest appraisal of your trade-in based on wholesale value. Also, ask them what you should ask for if you sell the vehicle yourself (retail).

Appraisals should be based on Blue Book, NADA (Blue Book), and local auction reports (ask to see the dealers copy) with consideration to vehicle condition and mileage. The Black Book "Official Used Car Guide" is published on a weekly basis by National Auto Research. The wholesale (dealer) and retail (consumer) versions of the NADA "Official Used Car Guide" are published quarterly by the National Auto Dealers Association. When using this book refer only to the wholesale (dealer) version. Do not use; red book, green book, loan value, insurance values, etc... These are intended for other purposes and do not accurately reflect what a dealer is willing to pay.

Blue Book and NADA are available at many libraries (reference section). If your library does not have these books, ask the librarian to order them. Additionally most bank loan officers, credit unions, loan companies and insurance companies use Blue Book and NADA during the course of their business. Give them a call, most will offer to help, in hopes of earning your business.

When your car is appraised it should fall into one of several categories. Categories range from worst condition (lowest value) to near perfect condition (highest value). Dealers decide which category that your vehicle falls based on mileage, appearance and running condition. The dealer then uses the vehicle type, model, category and year to look up the average wholesale value for your vehicle. The dealer may also take into consideration allowances or deductions based on options, lack of options and excess mileage.

If your trade-in has equipment that is not standard for that make and model, the dealer makes allowances for "adds". Adds are amounts that are added to the book value for equipment that is not standard factory equipment for the make and model you are trading in. The biggest adds are normally for "factory" air conditioning, automatic transmission and engine size upgrades. Smaller adds are also listed for power windows, power locks, factory sunroofs, T-tops, fancy wheels, etc... Ask the used car manager doing the appraisal to show you the value of each add.

If your trade exceeds an average of 15,000 miles for each year in service, it does not necessarily fall into a lower category. Instead, the dealer may make a smaller deduction of value based on number of excessive miles and category of car. If the dealer says you have excessive miles, have him show you the book he is using and the dollar amount of the deduction.

18

If you purchased an Extended Warranty and it has not yet expired, you may be entitled to a partial refund. Extended Warranty refunds are not automatic when you total or sell your car. To receive a refund you must go to the dealer that sold you the car and ask for it.

Refunds may be requested at any time. You do not "need a reason". You may decide that the warranty is not worth the cost and demand a prorated refund.

Refunds are normally prorated based on time and mileage. They are not normally based on whether or not the warranty was actually used.

If you borrowed the money to purchase the warranty, most likely the refund will be sent to the bank to reduce the loan balance and interest charges.

Do not cancel a warranty if you may need it in the future.

"WARRANTY & CREDIT LIFE REFUNDS"

If you purchased a Declining Term Life Insurance Policy from an insurance agent or Credit Life/Disability Insurance from the dealer or the lender, and the loan has not yet expired, you are normally entitled to a refund. Refunds are usually prorated by time over the life of the loan.

Credit Life/Disability Insurance refunds are not always automatic if you trade or total your car. You may cancel Credit Life/Disability Insurance at anytime. You do not need a reason.

No matter what the reason, you must contact the dealer or lender (If you obtained your own financing, go to the lender) and request a refund.

Since Credit Life Insurance is designed to protect a loan and the money to buy the insurance was included in the loan, most loan refunds will be paid directly to the lender and used to reduce your loan balance.

19

TRADE APPRAISAL WORKSHEET

"INSTRUCTIONS"

1. Enter the wholesale value of your trade-in from appraisal including the wholesale cost of
any necessary repairs. (Retail Value if selling the vehicle yourself)

If you feel more comfortable negotiating, than making a take it or leave it offer, you can try
starting negotiations asking for a higher trade-in price, but never agree to sell/trade-in your
vehicle for less than its' appraised wholesale value.

2. Enter any expected refund amount from extended warranties.

3. Add lines 1 and 2.

4. Enter any expected refund amount from credit life policies.

5. Add lines 3 and 4. The result is the cash value of your trade.

6. Enter loan balance or enter (0) if no loan.
If there is an existing loan balance still due, contact the lender. Ask for the current loan
balance. Ask how long this balance is good for and the daily interest charge (per diem).

7. Subtract line 6 from line 5.

If the result on line 7 is a positive number, this is your "trade equity".
Trade Equity can be used just like cash as a down payment.

If the result on line 7 is a negative number, you owe more than the car is worth.
You must either pay this off in cash or add it to the amount to finance on your new car.

 20

TRADE EVALUATION WORKSHEET

1. + _______ Trade Value based on appraisal by Used Car Manager, NADA, Black Book.
                      If selling the vehicle yourself enter the retail value
_______________________________________________________________________

2. + _______ Extended Warranty Refund (if any)
3. = (            )
_______________________________________________________________________

4. + _______ Credit Life\Disability Refund (if any)
5. = (           ) Cash Value of Trade-in
________________________________________________________________________

Do the addition above. The result is the cash value of your trade
_______________________________________________________________________

6. - _______ Current Loan Balance Date Verified ______ Good Until ____________
7. = (           ) Equity Per Diem _________ Name of Lender ________
                     Phone ___________ Months Remaining ______
________________________________________________________________________

Subtract the Existing Loan Value. The result is "trade equity"
________________________________________________________________________

If the result is a positive number, this is your trade equity and can be used just like cash to
reduce the cost of your new vehicle.
________________________________________________________________________

If the result is a negative number, you owe more than the car than is worth (Negative Trade
Equity). This amount will be added to your new car loan unless you provide enough cash to
cover the difference.
________________________________________________________________________

USED CARS - "SELECTION AND APPRAISAL"

USED CARS ARE SOMEONE ELSE'S TRADE-INS

The first step in determining a used car's value is understanding where the vehicle came from and how much the dealer paid for it. Since most used cars were traded into the dealership by someone else it is very important to understand how the trade-in system works. Therefore, before beginning to read about used cars take a few minutes and read the preceding section about trade-ins.

VEHICLE SELECTION

Select a vehicle that meets your personal, business and financial needs the same as if you were shopping for a new car. This includes verifying the cost of insurance before you buy! Please see vehicle selection in the New Car Section for details.

AVOID RENTAL CARS

Have you ever rented a car? If so, you have you probably realize that many people do not take good care of rental cars. Out of the large number of people that drive them there are bound to be a few hot-rodders. They make fast starts with the tires throwing up clouds of rubber, drive at excessive speeds, spill coffee on the seats, leave cigarette burns in the carpet and cause scratches, dents and dings. These cars get cleaned up before auction but they may still have excessive mechanical wear and tear. Therefore they should be avoided.

HOW TO TELL IF IT'S A RENTAL

Look for rental car company stickers (or sticky spots where the stickers used to be) on the visors, in the trunk, inside the door jam, under the hood and in the glove box. Ask the dealer to show you the title or registration from the previous owner. Don't take the dealer's word for it, ask them to show you the title. If the dealer doesn't have these items the vehicle may have come from a rental company, auction, etc... If it was a rental, don't buy it.

CALL THE PREVIOUS OWNER

If the title shows it was owned by an individual, call the previous owner and ask lots of questions about maintenance, mechanical problems, repairs, mileage (in case odometer has been rolled back), etc... One phone could possibly save you hundreds of dollars in repair bills on a lemon.

AVOID HIGH MILEAGE VEHICLES

Avoid vehicles that have high mileage. Even if the vehicle looks and runs good, every mile driven puts wear and tear on the vehicle and uses up the vehicles remaining life expectancy. It's important to consider how may miles will the vehicle have on it before the loan is paid off or you trade it in?

VERIFY IF THERE HAVE BEEN ANY RECALLS

Call the Auto Safety Hotline to verify if there have been any recalls. 1(800)424-9393

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TAKE AN OVERNIGHT TEST DRIVE

Ask to take the vehicle for an over night test drive. Many dealers will agree to this as long as you have full coverage insurance and a valid driver's license.

BEWARE OF CARS THAT LOOK "TOO GOOD"

Beware of freshly repainted vehicles. Why did it need repainting? Was it wrecked? Many repaint jobs are done very cheaply. If the rust is not completely removed it may come through the new paint within a few months. Ask if there is a transferable warranty on any repairs or paint jobs, etc...

MECHANICAL CHECKOUT

Take the vehicle to a good qualified mechanic for an inspection. Spending $25 to $50 to have the vehicle inspected could help you avoid paying to repair a lemon. The inspection should include an electronic check of the motor, emissions testing, brake inspection, fluids color inspection and a road test. The road test should be for several miles because some problems are not immediately apparent and only show up when the engine is hot. If your state or county requires any type of emissions control testing make sure to have the emissions inspection done before you buy. Emission control problems can very expensive to repair.

USED VEHICLE APPRAISAL

If you are considering buying a "used" vehicle, you should have it appraised in the same manner you would have your trade-in appraised. (See the section on Trade-ins). Take the vehicle to the used car manager that appraised your trade-in and offer to pay the Used Car Manager ($15 - $20) to check out and appraise this vehicle. If you have no trade, go to any dealer except where you plan to buy.

Many dealers will point out flaws in the vehicle you are buying in the hopes of selling you one of their cars. This advice works to your benefit. After all you do not want a car with problems.

BLUE BOOK AND NADA

The appraisal should be for wholesale value based on Black Book, NADA, local auction reports and the Used Car Managers Experience. Wholesale value is what most dealers sell used vehicles back and forth to each other for and is the industry standard. This is the "highest amount" that most dealers would have paid for the car. Although they may have paid considerably less by "stealing the trade". For more details on Black Book and NADA values see the section on Trade-ins.

WHOLESALE PRICES AVAILABLE AT

KBB.COM

USED CAR PRICING SERVICES

The following is a list of used car pricing services that will give you the high and low market value of most used cars. Have all information about the car you are calling about written down "before" you call as these services charge an average of $1 to $3 per minute.

1(900)999-2277 Auto Price Line 1(900)258-2886 Consumer Reports "Used Cars"
1(900)786-AUTO Edmund's 1(900)321-ROAD Road and Track Auto Hotline

23

USED CAR PURCHASE OFFER

INSTRUCTIONS

The following instructions are designed to help you fill out the "Used Car Purchase Offer".

1. Fill in the information at the top of "Used Car Purchase Offer" for both vehicles.

2. List repairs that you want the dealer to include in the purchase price. (Never accept oral
promises)

3. Next to purchase, enter the wholesale value (from the appraisal) for the vehicle you intend
to buy. You can try offering less.

4. Next to Trade-in, enter the wholesale value, or "0" if no trade, for the vehicle you want to
trade-in. Note: This refers to the vehicle's wholesale value - Not Trade Equity

5. Find the "Difference in Wholesale Value" by subtracting "Trade-in Value" from "Purchase
Value".

6. Next to "Dealer Profit" enter what you believe to be a small but reasonable dealer profit.
Make allowances for the following dealer costs and of course dealer profit:
Cleanup costs ($100 - $150). Repairs, if any, ($100 - $300). Dealer Profit ($200 - $600).

You can "try" a lower offer, but never pay more because the vehicle may depreciate
instantly, as you drive out of the dealer's lot, by amount you paid in excess of the
vehicle's true market value.

7. Add "Dealer Profit" to the "Difference in Wholesale Value" to find the "Trade Difference".
This is the "cash difference" that you are paying for the car.

8. Sign and date the offer.

THIS IS YOUR FINAL OFFER

This is your final purchase offer. Take it with you to the dealer. Give it to the salesperson and inform him that this is your final purchase offer. When they try to negotiate, they may say "you have made a mistake", that they can't possibly sell that car for such a low price, etc... Stand Firm! Because you have allowed them a small, but reasonable profit, most dealers will eventually take your offer. Make sure that the dealer signs the agreement.

THE FINANCE MANAGER

The salesperson will now turn you over to the finance manager who's job it is to try to increase dealer profit by selling you extended warranties, credit life insurance, financing, etc... Please read the section on "Financing" where you will prepare a separate purchase offer for the finance manager.

24

PEG

Preferred Equipment Groups save you money. Factories save money by "mass producing" nearly identical vehicles (versus every vehicle being custom made) and pass these savings to the customer in PEG's. Because sometimes you can get over $1,000 in options for less than $200 you should carefully read the factory brochure and select the PEG that best suits your needs and budget.

POWER STEERING AND BRAKES

Power steering and power brakes are the most important resale value options. They make driving easier and safer. Buy them!

AIR CONDITIONING

Factory air conditioning is worth the additional cost. It offers to you and your passengers comfort and it makes your vehicle easier to sell a few years from now (try selling a car without air conditioning in Florida in July). A/C has excellent resale value, after 3 or 4 years you can get back approximately 50% of the original cost.

AUTOMATIC TRANSMISSION

An automatic transmission offers easy hassle free driving. Furthermore when you resell this vehicle there may be more potential buyers. Automatic transmissions are expensive, but you get part of the cost back at trade-in time because automatics get higher resale value than standard transmissions.

STANDARD TRANSMISSION

The three primary advantages of a standard transmission (stick shift) are lower cost, slightly better fuel economy and better acceleration. The disadvantages are; it can be a hassle in stop and go traffic, a standard transmission may be harder to sell, and many people cannot drive a stick shift. If there is an emergency, and someone other than yourself needs to drive the vehicle to the hospital, will they able to do so?

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POWER WINDOWS

Power Windows offer convenience and safety. You can roll up the windows without stopping the car in case of sprinklers, changes in weather or unwelcome intruders.

ELECTRIC REAR WINDOW DEFOGGER

If you live in a cold weather state a factory installed electric rear window defogger is an excellent investment. They can remove fog from your windows in just minutes which can save you time and makes driving safer. Factory installed defoggers are usually a much better quality and have fewer problems (wires coming loose, etc...) than after-market (dealer installed) defoggers.

TILT STEERING

Consider tilt steering if more than one person drives your vehicle or if the standard steering wheel is uncomfortable for your body size or physical disabilities.

AUTOMATIC SEATBELTS

Automatic seatbelts are a life saving feature. The difference in having your seatbelt on or your seatbelt off can be a life or death decision. Take a minute an look at your family's seatbelt habits and decide it you need to make it a point to look for a car with automatic seatbelts

AIR BAGS

Air Bags can save your life. In the event of an accident it provides an extra cushion that slows your forward momentum in an accident. Please note that air bags do not replace seat belts. For true safety you should use airbags "and" seatbelts. Look for vehicles that include air bags for the driver and passengers as standard equipment. If the air bags are optional ask yourself "Which is more important; my money or my life?" Some insurance companies offer discounts for cars with air bags.

(ABS) ANTI-LOCK BRAKING SYSTEMS

Anti-lock brakes can save your life too! They help reduce stopping distances which can help prevent accidents. Additionally, more and more new cars are coming equipped with ABS. What happens during an emergency stopping situation when the car in front of you has ABS (short stopping distance) and you don't have ABS (longer stopping distance). Crunch! The possibility of causing an accident becomes very real. ABS could save your life and lower your insurance premiums. Look for it!

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"DEALER INSTALLED EXTRA'S"

New car dealers add options for two primary reasons. Increased sales and higher profit per deal. Some dealers charge reasonable prices for quality equipment. Other dealers, out to make a fast buck, install cheap generic equipment and charge high prices. It is important that you know exactly what you are buying, where to go for warranty service and the dealers cost. You may be able to save money by going directly to the outlet store and paying to have the work done yourself.

FACTORY WARRANTY?

Beware, some after-market products, especially electronics and air conditioners, whether installed by the dealer or local outlet stores may void all or part of your factory warranty. If something goes wrong who will fix it? You may be better off to find a vehicle with factory installed equipment.

APPEARANCE PACKAGES

Appearance Package stickers usually appear in the window next to the MSRP sticker. The sticker does not say what an appearance package consists of. Since dealers charge anywhere from $39 to $799 for these packages, most consumers believe that they are actually receiving some sort of added benefit from the appearance package. However, Appearance Packages consist of mainly one thing... dealer profit. Dealers often apply $20 pinstripes and $10 door edge guards to a vehicle and call it an appearance package. Don't let the dealer profit at your expense. Ask what the package consists of and pay only the dealers cost, which should be listed on the dealers invoice.

DEALER ADD-ON STICKERS

Dealer "add-on" or "bump" stickers are usually located to the right of the MSRP sticker. Dealers add radios, appearance packages, graphics, custom wheels, sunroofs, bedliners, spoilers and ground effects, etc... to make their vehicles more attractive. They also want to increase profits with big mark-ups.

Verify the dealers cost by checking around for similar equipment at outlet stores or car customizers. Also ask to see the cost listed on the dealers invoice. Pay only the dealers cost.

DON'T OVER CUSTOMIZE

Generally, customizing adds little or no value to the vehicle. Money Gone! If you do customize, do it tastefully. What would the average buyer look for in a used car? Graphics, ground effects, custom wheels etc... look good, but they have little resale value. Some types of customizing (exotic paint jobs, etc...) can actually reduce the resale value.

DEALER INSTALLED RADIOS

The dealer mark-up on dealer installed radios may be outrageous. Don't just agree on a price. Agree on a radio. If you don't, the dealer may install a cheap generic radio that sounds terrible. Shop around at local car radio stores and select your own radio. Then allow the dealer a small profit to install it.

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NEVER BUY DEALER INSTALLED AIR CONDITIONING

Never buy dealer installed air conditioning. Most "factory" warranties do not cover dealer installed products. If you purchase dealer installed air conditioning, you may experience difficulty in getting service. Additionally, factory air conditioners cost less and have higher resale value.

DEALER INSTALLED SUNROOFS

Dealer installed sunroofs may be overpriced. Some dealers get a customer to agree on a price for a sunroof and then try to cut costs by having local outlet stores install a small, cheap, generic sunroof, that is nonremovable and may or may not leak. Instead, shop around and find your own sunroof. Look for large sunroofs. Select a color or tint. Specify that the sunroof should be easily removable. Look at the quality of the work, the type of seal and the warranty. By having the sunroof installed yourself you can save money and get a better sunroof.

DEALER INSTALLED ALARM SYSTEMS

Dealers buy alarm systems from local outlet stores at low prices and then try to charge the customer way too much. Sometimes the dealer or outlet store changes the name on the alarm to make it seem like a more expensive system and to prevent price comparisons with the outlet stores own brands. Don't compare names. Compare features. You can usually get a better deal at the outlet store. Dealer cost on alarm systems ranges from $75 for cheap systems to $200 for top of the line models. Some dealers may try to charge from $300 to $1000 for these alarms after changing the name.

SOME ALARM SYSTEMS CAN SAVE YOU MONEY ON CAR INSURANCE

Most insurance companies now offer discounts for alarm systems but they require the alarm system to automatically arm itself whenever you exit the car. If you must flip a switch, use a key, or use the remote to turn it on then you need to purchase a different alarm. Don't just buy what the dealer is selling, shop smart! Contact your insurance agent before you buy!

AN ALARM COULD SAVE YOUR LIFE

Consider getting an alarm that can be set off from a remote on a key chain. If you find yourself in a dangerous situation, at the mall someone has followed you to your car (robber, etc...), you can set off the alarm with the remote. This may scare off the robber or attract the attention of others who may come to your assistance.

RUSTPROOFING AND PAINT PROTECTION PACKAGES

Having your car rustproofed and paint protected can help your car maintain the new car look over the years. A good package will have a lifetime warranty, free re-application nationwide, and the warranty should cover repairing surface rust. Beware, some dealers try to fool consumers by using fancy stickers and fancy names to cover the fact that their rustproofing came from a spray can and their paint protection was only a wash and wax. Dealer cost for cheap packages starts at $50 and increases up to $250 for the best complete packages by companies like Ziebart. These complete packages include rustproofing, paint protection, sound deadener (foam), fabric protection, a life time warranty and free re-application. Verify that the work was actually done by a "qualified" paint protection company (call them). Verify the warranty (Get the warranty books). Verify the Cost.

"FINDING THE DEALERS COST ON NEW CARS"

The first step in determining the lowest possible cost for your new car, is to find and understand the dealer's "real" costs. The next step is to understand how dealers try to overstate their costs to drive up the purchase price (and dealer profits). Additionally, you will need to understand how dealers try to overcharge customers and how knowing the dealers true cost can save you money. Finally, you will learn how to make a "reasonable" purchase offer that gets you the best deal without the hassles!

MSRP - MANUFACTURER'S "SUGGESTED" RETAIL PRICE

Manufacturer's "Suggested" Retail Price is shown on a factory sticker in the window of the vehicle. The key word is "suggested". You can purchase a vehicle for much less. All standard, no extra charge, equipment is listed on the left. Options, Preferred Equipment Groups and their costs are listed to the right. Destination Charges are listed on the bottom right and are included in the MSRP. The total MSRP (suggested price) is listed at the bottom. Refuse to buy any new vehicle unless you can see the MSRP sticker, as some dealers hide the sticker and try to inflate the price (especially on dealer trades or factory orders.

PREFERRED EQUIPMENT GROUPS

PEG's - Preferred Equipment Groups can save you money. Get a free brochure from the dealer. Read the brochure and select the PEG that best suits your needs and budget. Often the MSRP sticker shows the full cost for the equipment and then a "credit" or PEG discount underneath. Dealers will sometimes try to convince the customer that this is a form of rebate. It's not. The manufacturer saved money by mass producing identical vehicles with identical option packages (as opposed to every vehicle being different) and they are passing some of these savings on to you in the form of a lower price (PEG discount).

DESTINATION CHARGE

The Destination Charge is a non-negotiable fee from the factory. It is included on the MSRP window sticker. The destination fee is also included in the dealers invoice as shown in new car pricing books such as Consumer Guide. Beware, a few dealers may try to charge this fee twice.

INVOICE

When a vehicle is shipped to a dealer from the manufacturer, an invoice is included. The invoice is a bill from the factory to the dealer for the vehicle. The invoice is the dealers cost. Dealers get other discounts from the factory (below invoice) such as holdback and quantity bonuses. These other discounts are to cover the dealers operating expenses, etc.

SOURCES FOR DEALER INVOICE

Sources for dealer invoice include Consumer Guide, Edmund's New Car Prices, PACE, etc.. They are available at bookstores and the library. Also, you can request to see the dealers invoice at the time of purchase. If the dealer refuses, go to another dealer.

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PAY $200 OVER INVOICE

To allow the dealer a small, but reasonable, profit the recommended bottom-line price is $200 over invoice. Dealers may occasionally advertise lower prices but usually they include catches such as the customer must pay doc fees, retail on dealer add-ons, etc... You can try offering less, but it is our feeling that $200 over invoice is a fair deal if you get all of the other discounts listed in this book. If the dealer does not have the exact vehicle you want, go to another dealer or ask the dealer to "locate" you a vehicle by computer. When dealers locate a vehicle they trade a vehicle from their inventory for a vehicle they want from another dealer. Normal dealer costs for locating a vehicle are approximately $120. Therefore to cover the dealers transfer expenses, paperwork, etc... you should pay $320 ($200 plus $120 locate fee) over invoice.

DON'T GET CAUGHT UP IN DEALER HYPE

Dealers may advertise that they are selling cars below invoice. This is often a hook to get you in the door. Yes, they may sell the car under invoice, but they will make a profit by charging doc fees, CRA's, warranties, Credit Life Insurance, Appearance Packages, Preparation fees, high interest rates etc... Most of these dealers will refuse to sell the car below invoice without charging you for extra's.

HOLDBACK

Holdback is a form of rebate (below invoice) from the factory to the dealer to cover the dealers operating expenses and to increase dealer profit. Holdback is usually 2% - 5% of MSRP. On a $20,000 vehicle at 5% holdback would be $1000 ($20,000 x .05). Holdback is usually shown on the dealers invoice.

SOME IMPORTS DON'T HAVE HOLDBACK

Although most American cars have holdback, there are a few foreign car manufacturers that do not give the dealer holdback or offer a smaller percentage. Because holdback is a marketing tool like Factory to Dealer Rebates, it is subject to change. A dealer that doesn't have holdback this year may have it the next. The best strategy on imports is to call around and become educated. Then negotiate the deal as though the dealer has holdback (because they could be bluffing). If in fact there is no holdback, you should allow the dealer up to 5% of MSRP over invoice as profit (You gave this much to American dealers as holdback). If in doubt, ask to see the dealers invoice which may show the dealers holdback. If a dealer won't show you the invoice, buy from a different dealer.

DEALER PROFIT

Holdback is the reason a dealer can afford to sell a car at or near invoice. At $200 over invoice dealers do make a reasonable profit from holdback, year end quantity bonuses, possible profits on your trade, profits from warranty repair work that is paid for by the manufacturer and financing. In addition the dealer may receive referrals from you in the future.

STICKER JUMP

Sticker Jump is a mysterious price increase that occasionally occurs between the total on the MSRP sticker and the Dealer Add-On sticker. Dealers can "accidentally" raise the price hundreds of dollars just by doing inaccurate arithmetic. Read the sticker and check the math!

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NEW CAR COST WORKSHEET

"INSTRUCTIONS"

Fill in the following information on the New Car Worksheet on the next page.

1. Fill in the blanks with information from the new car. This worksheet will be used to find
the MSRP and the dealers invoice.

2. The CHOICE column is used to indicate which equipment you wish to purchase. If you
absolutely do not want certain equipment draw a line through it and across the page. If
you are uncertain place a question mark? Add equipment not listed at the bottom of list.

3. Look at the factory brochure (free at any dealer) and determine what PEG most suits your
needs. Indicate that equipment is included in a PEG by placing "PEG #" next to the
option in the choice column.

4. Use Edmund's New Car Prices, PACE or Consumer Guide (Available at most bookstores)
to find the MSRP and Invoice amounts. Fill in these amounts next to the options you have
indicated.

Also, use these books to make sure you select the correct PEG. Try more than one PEG
to make sure you get the best discount and the most equipment for your money.

5. Destination will be the same under both columns as there is no negotiating on this fee.

6. The amount for the PEG in the MSRP and Dealer Invoice Columns should show the
package cost minus the PEG discount.

7. Total the MSRP and Invoice Columns.

8. If the MSRP column on the cost worksheet equals the MSRP on the vehicles factory
window sticker and you have done all math correctly, then you have correctly figured
what the dealer paid the factory for this vehicle (invoice).

If not, find what is different between the dealer sticker and the cost worksheet. Make
necessary corrections until these numbers are the same.

Please Note

There may be additional dealer costs for dealer installed items, appearance packages, or
rustproofing packages. To reduce paperwork these items will be entered directly onto the
purchase offer or lease worksheets.

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NEW CAR COST WORKSHEET

Year __   Make _________ Model ___________ Style ______________ PEG # ______
Exterior Color ________ __ Interior Color ____________

OPTION                  CHOICE             MSRP          DEALER INVOICE
Destination                 _________          _______        _______
Base Price                  _________         _______        _______
PEG #                        _________         _______        _______
PEG DISCOUNT   -(_________)     - (_______)    -(_______)
Air Conditioner          _________         _______         _______
Alarm                        _________         _______         _______
Anti-lock Brakes       _________          _______        _______
Air Bags                    _________         _______         _______
Axle Ratio                  _________        _______         _______
Body Side Moldings   _________        _______         _______
Bumpers                     _________       _______         _______
Cruise                         _________       _______         _______
Custom Paint              _________       _______         _______
Digital Dash                _________       _______         _______
Differential                  _________       _______         _______
Engine                        _________       _______         _______
Floor Mats                 _________       _______         _______
Gauge Package          _________       _______         _______
Intermittent Wipers     _________       _______         _______
Luggage Rack            _________       _______         _______
Mirrors                      _________       _______         _______
Power Antenna          _________       _______         _______
Power Locks             _________       _______         _______
Power Seats              _________       _______         _______
Power Steering          _________       _______         _______
Power Windows        _________       _______        _______
Radio                         _________      _______        _______
Rear Defroster           _________      _______        _______
Rear Wiper                _________      _______        _______
Seat Style                  _________      _______        _______
Seat Material             _________      _______        _______
Spare Tire (size)        _________      _______        _______
Sun Roof                   _________      _______       _______
Tilt Steering               _________      _______       _______
Tinted Glass              _________      _______       _______
Tires                          _________     _______       _______
Towing Package        _________     _______       _______
Transmission              _________     _______       _______
Wheels                      _________     _______       _______
             MSRP      =(                )  =(             )      INVOICE

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REBATES AND INCENTIVES

Call several dealers to verify rebates and special incentives, as many dealers try to hide the rebate (pocket the money). Factory rebates are published in the Wall Street Journal and some automotive magazines. Call as many sales people as possible to get an education in rebates. Some may lie, but if you call enough you will find a salesperson that is willing to tell the truth in the hopes of an easy sale. Phone calls and a little of your time may save you thousands of dollars. Ask about all of the rebates and incentives listed below.

Use dealer newspaper advertisements to find factory rebates. Dealers often try to advertise low prices/payments in the newspaper. To get to these prices they may use factory rebates. The rebates may be listed in the fine print. The dealer doesn't want you to read the fine print, so read it first!

There is a list of manufacturer's customer assistance hotlines (most are toll free) in the Phone List section of this book. Look up the manufacturer's phone number and ask them how to receive information on all types of rebates and regional incentives that may apply to vehicle you are interested in purchasing. If they can't answer all of your questions, ask them to give you the phone number for someone who can. Many will send you a full color brochure if you ask.

Another source of rebate information is the magazine Automotive News which lists current rebates for many (but not all) new cars on the second to last page. Automotive News is $2 per issue. Their telephone number is 1(313)446-6000.

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Don't fall for the dealer rebate trap. Dealer rebates are different from factory rebates. With factory rebates the dealer's cost is reduced and therefore the dealer can afford to sell the car at a lower price (below invoice) and still make a profit. With dealer rebates there is no reduction in the dealer's cost and therefore the dealer would be unwilling to negotiate a price below invoice.

Factory to customer rebates are from the manufacturer and reduce the dealers cost (below invoice). They can be found in newspaper advertisements and most dealers will give you these amounts over the phone. However, you should call several dealers because some salespeople may not be aware of the current dollar value of all factory to customer rebates.

Factory to dealer rebates are often hidden from the customer. Some manufacturers have changed their policy of giving the factory to customer rebate directly to the customer and now give it to the dealer to use as a negotiating tool. This is still a customer discount. The dealer may try to hide it or say that this is the dealer's money. Don't believe it. This is still intended as a customer incentive.

Factory to Dealer Rebates are like a closed door secret. You have to keep opening doors to find them. Start by reading the fine print in magazines and local newspaper advertisements. Call dealers and ask how they got to the low price in the advertisement.

Use psychology when calling dealers and asking about Factory to Dealer Rebates. Don't ask "is there a rebate". Instead ask "how much is the rebate?" This line of questioning assumes that a rebate exists and makes it more likely that the salesman will give you an honest answer.

Regional Incentives are money rebates from the factory to the customer and do not affect the dealers cost. They may stipulate the vehicle cannot be dealer traded from another state. These rebates are in addition to normal rebates. Since these rebates are not always advertised some dealers may try to hide these rebates and keep the money themselves. Although a few dealers may try to hide these incentives they are a factory to customer rebate to which you are entitled.

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FIRST TIME BUYER/RECENT COLLEGE GRADUATE/MILITARY REBATES

These are factory (or lender) to customer rebates. They may have some type of stipulation such as, you must finance through a certain lender, etc... Even if you qualify for this rebate, you need to ask for it. Sometimes dealers forget and others pocket your money. Even if you have financed a used car or paid cash for a new car you may still qualify for a First Time "New Car" Buyer Rebate.

FACTORY EMPLOYEE DISCOUNTS

Ford, Chrysler and GM employees and their immediate families are entitled to a special factory employee discount. This rebate is "in addition" to all other discounts. Unfortunately, there some dealers (and salespeople) that are less than honest or honest but inaccurate about the amount of the discount. Therefore, it is in your best interest to call your factory representative and ask about what the discount is buying off the dealer's lot versus or ordering the vehicle from the factory.

If you own and use a Ford, GM or other automobile manufacturer's credit card and you are buying a new vehicle from that manufacturer you may be entitled to a rebate based on your usage. You should contact the lender to find the amount of this rebate and how to claim it.

Credit Cards that offer rebates based on usage may sound like a good idea until you start considering things such as having to make credit card payments and car payments at the same time, which can be a financially dangerous situation. Even if you get past payments, annual fees and high interest charges their is another disadvantage to a credit card that most consumers do not realize. Most people will spend more (up to 80% more) if they use a credit card, instead of paying cash. Think about it next time you reach for "your credit card".

Many manufacturer's offer special rebates or incentives for the handicapped. Once again, you need to call several dealerships and ask questions about these for these rebates because many new car salespeople are unaware of or may misinformed about these special factory discounts.

Fleet discounts are a special rebate from the factory to business customers. The factory uses these fleet discounts to make their product competitive with prices offered by other manufacturers. If you own or run a business you should contact the Fleet Managers at local dealerships to ask about fleet discounts and how many vehicles your company needs to buy per year to qualify. Keep in mind that unlike other factory rebates, fleet rebates are negotiatable.

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NEW CAR PURCHASE OFFER

INSTRUCTIONS

The "Purchase Offer" is what you will take to the dealer when you are ready to buy. If this form is filled out completely and correctly there should be no need to negotiate. This is your final offer!

1. Fill in all the information on how you want the vehicle titled.

2. Enter all information about the vehicle you wish to purchase.

3. Enter the "Dealers Invoice" from the "New Car Cost Worksheet".

4. Indicate the dealers cost for the Appearance Package. If the appearance
package only consists of a pinstripe and door edge guards enter $20
(approximate dealer cost).

5. Use the information from the "Dealer Installed Extra's" section of this book to find
the dealer's cost for any dealer add-ons (radios, sunroofs, window tinting) and
enter the dealer's cost.

6. Add Factory Invoice, Appearance Package and Dealer Installed Extra's to find
the Dealer's Cost.

Keep in mind that Invoice is not the dealers true cost. The dealer will receive
holdback, quantity bonuses, etc... which will be dealer profit.

7. If you wish to have the dealer install any radio's, sunroofs, window tinting, etc...
first research the dealers cost. Enter the dealers cost, and any small profit you
wish to offer the dealer for installing these items. Make sure to specify what
make, model, style, color, size, etc...

8. If you want the dealer to install, or the dealer has already installed, a rustproofing
package, enter the dealers cost.

Dealer costs range from $50 for a cheap rustproofing package to $280 for the best
packages. Ask to see the invoice from the rustproofing company to verify the work
was actually done and the dealers cost.

If the work has not been done, make absolutely sure to specify exactly what the package
consists of, the warranty and the name of the company doing the work.

9. Enter "$200 for an in-stock vehicle" or "$320 for a dealer locate vehicle" as "Additional
Dealer Profit". You can try offering less, this is just our recommended bottom-line price.

10. Add "Total Dealers Cost", "Items Dealer to Install", "Rustproofing" and "Additional Dealer
Profit" to find the "Purchase Price".

11. Indicate all "Rebates" as shown. (See Rebate Section).

12. Subtract all rebates from the "Purchase Price" to find "Purchase Cost After Rebates".

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13. Enter the appraised "Wholesale Trade Value" of your trade

14. Subtract the "Trade Value" to find the "Trade Difference".

Trade Difference is what you are paying for the new car, after your trade allowance.

An alternate method is to negotiate the purchase price and the trade-in value separately. If you want to use this method leave the trade-in section blank, and fill in only the sections on the new car. Negotiate as though there is no trade-in. After successfully negotiating the purchase price of the new car, then you can fill in the trade in section and negotiate the price you are willing to sell your trade-in to the dealer for. Use the method that is most comfortable for you.

THIS IS YOUR FINAL PURCHASE OFFER - STAND FIRM

This completed form is your purchase offer to the dealer. Hand it to the salesperson when you are ready to buy. Stand firm. If you followed the instructions and did the math correctly, you have made a bottom-line purchase offer while allowing the dealer a small profit.

Often you can reduce negotiating time by placing a calculator and consumer pricing guide such as Consumer Guide, Edmund's New Car Guide or P.A.C.E., on the salesman's desk next to your offer. This shows the salesman that you are an "educated buyer" and you are well prepared. Often this little trick intimidates the salesman and completely throws off his sales pitch. Often it can cut negotiating time in half.

Salesman are trained to take control of their customers. They tell you to sit at their desk while they run back and forth negotiating offers between you and the sales manager. They may actually be discussing the weather, or who knows what else with the boss. They may even go outside to smoke a cigarette while you sit there. Their goal is to wear you out in the hope that you will try to hurry the negotiations by agreeing to a higher price (more dealer profit). There are several things you can do to take control back and speed up the negotiation process. You can pull out the classifieds and start looking at car advertisements or start thumbing through a car pricing guide. Walk around looking at other cars. You can start walking slowly towards your car. All of these will tend to make a salesman feel as though he is losing control of the situation. Generally, the salesman's response will be to rush through the negotiations and agree to a low price hoping of making a quick sale before you change your mind.

If the vehicle you are purchasing is model that is readily available at most dealers stand firm, most dealers will accept your offer. If it is a brand new one of a kind vehicle the dealer may demand more money. In this case, only negotiate upwards in $25 increments. This increases your chances of wearing out the sales force and getting the best possible deal.

After the sales manager has agreed to the Trade Difference and Sales Tax, they will try to throw you a curve. They will introduce you to the finance manager. The finance manager will try to raise your cost and their profits with warranties, credit life insurance, inflated interest rates, etc...

Please read the following sections devoted to dealing with banks and the finance manager. Then fill out the "Finance Purchase Offer".

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Name ____________________________ Home Phone ___________ Work Phone ______ Address __________________________ City ____________ State _____ ZIP _________
_______________________________________________________________________
VEHICLE INFORMATION
Year __ Make _____ Model ______ Style ____ Color ____ Miles _____ Stock Number ___
VIN ________ PEG ____ Engine ____ Transmission _____ Tires _________ Wheels ____
Sunroof __ AC __ ABS ___ Power Steer ___ Power Locks __ Tilt ___ Cruise __ Radio ____
Luggage Rack ___ Interior _____ Seats _____ Other ______ _____ _____ ______ ________________________________________________ _____________________
PURCHASE PRICE
+ _______ Invoice (Including Destination)
+ _______ Cost of Dealer Appearance Package (if applies)
+ _______ Cost of Dealer Installed Extra's (if applies)
=(             ) Total Dealer Cost (Dealer Keeps Holdback & Bonuses)
+ _______ Items Dealer is to Install (Make _____, Model ____)
+ _______ Rustproofing (if applies) Brand ____, Type ____ Pkg. ____
+ _______ Additional Dealer Profit ($200 in stock, $320 locate)
=(             ) Purchase Price
_______________________________________________________________________
REBATES
- _______ Factory to Customer Rebate
=(             )
- _______ Regional Incentive
=(             )
- _______ Factory to Dealer Rebate
=(            )
- _______ First Time Buyer/Recent College Grad/Military
=(            )
- _______ Factory Employee (or Family) Discount (if applies)
=(            )
- _______ Manufacturer's Credit Card Rebate
=(           ) Purchase Price after "Factory Rebates"

TRADE IN
- _______ Trade Value, Based on NADA/Black Book
=(             ) Trade Difference


Sales Manager, please sign and date here. ___________ __/__/__
 

Copyright 1993 & 1999, Steven Nunnally

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"THE FINANCE MANAGER"

After you negotiate the cash price for your new or used vehicle, the salesperson will turn you over to the finance manager. The finance manager is a commissioned salesperson whose objective is to get you to spend more money. The finance manager specializes in fast talk and small print. The finance manager is often able to make a bigger profit than the salesperson made on the car.

PRODUCTS OFFERED

Products and services offered by the finance manager include extended warranties, credit life and disability insurance, glass etching, rustproofing, doc fees, leases and various financing options.

THE PAYMENT STRATEGY

The finance manager uses a completely different strategy than a car salesperson. Car salespeople negotiate on price. The finance manager however negotiates based on monthly or even daily payments. When the finance manager says "You can protect your rather sizable investment with an extended warranty that costs about the same as a cup of coffee a day", many people are persuaded based on the low "daily cost". Don't fall for it, a cup of coffee a day over a five year loan period is approximately $1,000, plus the additional interest charges. Avoid daily and monthly cost figures, make your decisions based on the "Total Cost" of every item.

BE PREPARED

Avoid being manipulated in the finance office by becoming educated. As you read the following section devoted to services "sold" by the finance manager, you will learn how to save money.

FINANCE PURCHASE OFFER

The "Finance Purchase Offer" that follows this section covers many of the curves the finance manager will throw at you. Instead of listening to all the hype, fill out the "Finance Purchase Offer" and hand it to the finance manager "before" he can start the fast talk. You save time and money.

READ THE CONTRACT

If you agree to dealer financing, etc... read the purchase and finance contract carefully. Make sure that no items (warranty and credit life, etc.) have been added. Make sure payments and total cost are correct. There are a few dealers (not many) that will try to switch contracts, after you have read the original. If the finance manager "leaves the room" with the contract in his hand or "reprints" the contract for some reason, read the contract again!

READ THE CONTRACT AT HOME BEFORE YOU SIGN

Never make a rush decision. If the finance manager is pressuring you to make a hurried decision he may have an ulterior motive. There may be something in the fine print that he does not want you to read. Ask to take the contract home. Read it overnight and be certain you understand it, before you sign!

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"EXTENDED WARRANTIES"

If you are considering buying a warranty, read the contract, and find answers to the following:

1. When does the warranty expire (months and years)?

2. Is the warranty "Bumper to Bumper" or "Power Train Only"?

3. How much is the deductible per visit?

4. Read the section on exclusions? What isn't covered?

5. Where will the warranty work be performed?

6. Does the warranty cover parts "and" labor, towing and car rentals?

BUMPER TO BUMPER

Most "Bumper to Bumper" warranties cover everything except wear and tear type items such as tires, belts and hoses. Read the contract!

POWER TRAIN WARRANTIES

A Power Train Warranty usually covers the transmission and what's inside the engine. Little else. They seldom cover electronics, air conditioners, fuel injectors, carburetors, ignition systems and other non-powertrain components. Yet, these are the components most likely to fail. In a few cases where there are major repairs, a power train warranty can save money. However, in most cases you'll spend more for the warranty than you save in repairs. That's why warranty companies exist, profit!

NEW CAR EXTENDED WARRANTIES

Extended warranties can save you money but often only "after" the "free" factory warranty expires. Is there really anything the extended warranty covers that the free factory warranty doesn't? Also, extended warranties start the day you buy the car, but you get little benefit until the free factory warranty expires. Therefore you should determine how long you will own the vehicle, how many miles you will drive, length of the free factory warranty and how much time the vehicle will actually be covered by the extended warranty before you trade-in or resell the car.

Example: Your new car comes with a free 3 year warranty and you buy a 5 year extended warranty. Since your car was covered by the free factory warranty for the first 3 years, you only receive 2 years of benefits from the extended warranty. Does it really make sense to pay for a 5 year warranty and only receive 2 years of benefits?

Another factor to consider with the extended warranty is transferability. Can the warranty be transferred? What will it cost? Can it be transferred to a dealer, an individual or both? Ask questions? Make the dealer show you the answers in writing and carefully read the extended warranty contract.

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CONSIDERING BUYING A USED CAR WARRANTY?

First verify whether or not this vehicle has an unexpired transferable manufacturers warranty. Contact the service department of a dealer that sells that brand of vehicle and ask when the warranty expires and how to transfer it. Read the warranty before you buy. As shown above, there are big differences between a "Bumper to Bumper Warranty" and a "Power Train Only Warranty". Most used car warranties are sold at a very high price and only cover a short period of time and therefore offer less value than new car warranties. If you do buy, negotiate the price of the used car warranty!

ASK TO SEE THE FINANCE MANAGERS WARRANTY COST BOOK

If you decide to buy a warranty, ask the finance manager for the best "Bumper to Bumper" warranty available. Ask for an explanation of deductibles, what's covered, what's not and if it is transferable. After you have chosen the best warranty, ask the finance manager to show you the dealers cost for the warranty you have specified. The dealer will have something in writing (warranty cost book) from the company that sells them the warranties that specifies the dealers cost for each type of warranty on each type of car. If the finance manager refuses to show you the cost book or some type of documentation of dealer cost refuse to buy the warranty. Explain to the finance manager that if he wishes to receive a commission for selling you a warranty that he will have to show you the warranty cost "before" you will buy it.

OFFER THE DEALER A PROFIT ON WARRANTIES

Offer to pay $100 over the dealers cost. This allows the dealer a small profit and the finance manager a small commission.

If the finance manager argues price, walk out and talk to the salesperson. The salesperson does not want to lose their commission for selling the car, so they may come to your defense and urge the finance manager to accept your offer.

The finance manager and the salesperson both know that a small commission is better than no commission at all. Plus volume matters to the dealer because they may be able to get quantity discounts.

"CREDIT LIFE AND DISABILITY INSURANCE"

DON'T BUY CREDIT LIFE INSURANCE

Dealers overcharge on credit life and disability insurance, often costing the consumer hundreds or even thousands of dollars. Protecting your investment with insurance is a smart idea, overpaying for insurance is not.

A disadvantage of Credit Life Insurance is that if something does happen to you, this insurance pays directly to the lender, "not" to your family. Don't buy it.

BUY DECLINING TERM LIFE INSURANCE INSTEAD

Instead, buy Declining Term Life Insurance from a life insurance agent. Declining Term and Credit Life are basically the same insurance. The primary difference is that Declining Term is sold by an insurance agent and Credit Life is sold by a lender (and therefore has a higher cost). Declining Term Life Insurance offers more coverage at a much lower price. Policies typically range from $150 to $300.

An added benefit with Declining Term, is that the insurance pays directly to your beneficiary. Your family can then make the decision whether to use the money to pay off the vehicle (if it's still worth the money) or spend the money on more important items (such as food and rent).

DISABILITY INSURANCE

Once again it is less expensive to buy disability insurance from your life insurance agent than from a car dealer. Contact a your local life insurance agent for details.

ASK QUESTIONS

Ask questions when you buy insurance. Not just questions about cost, but what if.... hypothetical type questions. For example; it would be important to ask questions such as... "If you buy a car in the name of a husband and the wife... will the insurance pay if one dies, or do both the husband and the wife have to die in order for the policy to pay off?"

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"DEALER FEES"

DOC FEES AND CRA'S - WHAT ARE THEY?

Dealers get you to agree to the price of a car, and "afterwards" they try to raise the price by charging a doc fee. A "Doc Fee" or "CRA" is a fee that dealers charge that has no real purpose other than to help the dealer make bigger profits. This fee typically ranges from $29 to $289 and more. But what is it? The answer to this question varies from dealer to dealer. Some dealers will say that this fee is for a coupon book that includes free oil changes. Others may say it's for paperwork. A few may even try to say it's required by the state. Dealer profit is the real reason. Don't pay it!

THE COUPON BOOK

Who in their right mind would pay $150 for a coupon book, especially when they will never use 90% of the coupons? As for the free oil changes, many manufacturers now include free oil changes with the car. Why pay for something that's free? Don't Buy It!

PAPERWORK

Why should you pay a dealer to do paperwork? Do you pay a furniture store to fill out your purchase agreement? Do you pay an insurance agent to fill out your policy? The dealer makes enough from holdback, financing, reselling the trade, etc... that they do not need to collect a separate fee for paperwork. Don't Pay It!

REFUSE TO PAY DOC FEES OR CRA'S

Doc Fees and CRA's fees have no real purpose and are of no benefit to the buyer. They are just another way for dealers to increase dealer profits. The dealer has already made enough profit from holdback, quantity bonuses, etc... Refuse to pay these fees! If a dealer insists on charging this fee, go to another dealer.

DEALER PREP FEES

Many dealers try to charge their customers for dealer preparation (prep) fees,. These fees range anywhere from $29 to $1200. Dealers give all kinds of reasons for these fees but the main reason is cleaning the car and preparing it for the new owner. What the dealers don't tell the customers is that they have already been paid by the factory to clean the car, fill it with oil, antifreeze, power steering fluid, etc... The factory pays for everything. If a dealer tries to charge you dealer prep refuse to pay. If they insist call the manufacturer's customer service number (listed in Phone Number section) to complain and go to another dealer.

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"TYPES OF LOANS"

MAKE SURE THE CONTRACT SAYS "SIMPLE INTEREST"

Make absolutely certain the contract says "SIMPLE INTEREST" and guarantees that there will be no pre-payment penalties. If you pay off your loan early, trade before the loan is paid off or total your vehicle a Simple Interest loan may save you thousands of dollars in interest charges.

NEVER USE RULE OF 78'S, PRE-COMPUTED OR COMPOUND INTEREST

Rule of 78's, Pre-computed and Compound Interest loans are dangerous to your financial future. With these types of loans a large of your payment for the first 2 years will go to interest with only a small portion being applied to the principal (loan balance). Interest charges accrue much more quickly on Rule of 78's and Compound Interest loans than on Simple Interest loans (where interest accrues only a little at a time). If you wreck your car, pay it off early or trade it in you could end up owing thousands of dollars more on Rule of 78's and Compound Interest loans than if you had borrowed the same amount with a Simple Interest loan.

VARIABLE INTEREST RATES CAN COST YOU BIG BUCKS

Never allow a dealer or lender to talk you into accepting a Variable Rate Loan. Variable Interest Rate Loans offer a low teaser rate to get you to sign. However, if the national prime interest rate increases, so will your payments. Since interest rates are at currently low, chances are they will not go much lower, but they can go up drastically. This can cost you a lot of money. Avoid Variable Rate Loans. Instead, look for "fixed rate - simple interest" loans.

AVOID "THE PLAN", "HALF A CAR" AND "LEASES"

"The Plan" and "Half a Car", are sales tactics designed to convert you from buying a car into leasing it. The dealers primary motivation is profit. If the dealer is pushing a lease, you can bet he is trying to find a way to raise your total cost. Some dealers use example sheets to compare the benefits of leasing versus the cost of purchasing. Often these examples are deliberately misleading and are based on fictitious car deals rather than on the vehicle you want to purchase. Do not fall for these sales pitches. There are a few instances where leases can be beneficial to the consumer. It is because most leases are very complicated and full of loop holes that can suck the money right out of your wallet that leasing is a bad investment for the average consumer.

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PAYMENTS

The "number of payments" is one of the most critical factors in a buying decision. Most consumers shop, on the basis of the "amount of the payment" or what they can afford monthly. Dealers refer to these customers as "Payment Shoppers". Payment Shoppers are often blind to the true cost of what they are buying. Dealers often make huge profits from payment shoppers, by arranging a "longer loan" with lower payments. But while the payments are lower the number of payments increases and the total cost of all the payments may rise by thousands of dollars. Never buy a car based solely on the monthly payments.

AVOID LONG TERM LOANS

Lenders increase your interest rate the longer you finance, especially on used cars. An example of new car interest rates could be: at 36 months the rate might be 8%, at 48 months 9%, at 60 months 10% and at 66 months 12%. On longer term loans the total cost of financing can double or even triple.

NEVER FINANCE MORE THAN 60 MONTHS

The largest interest rate increase usually occurs between 60 and 66 months. The 6 extra payments only lower your payments slightly, but the interest charges increase dramatically.

SHORT TERM LOANS LOWER THE EQUITY GAP

The equity gap is when you owe more than a car is worth (negative equity). Keeping this gap small can be very important, especially if you decide to change vehicles before the end of loan or if the vehicle is totaled. Remember, you will need to pay off any negative equity in cash or refinance it onto your next loan If not, you may not be able to purchase a replacement vehicle.

AVOID DELAYED PAYMENT PLANS

Delayed Payment Plans are money traps. If you delay your first payment by only one month, the dealer can raise your interest rate by 1/2%. Furthermore your entire loan will be delayed one month over the term of the loan costing you several hundred dollars in "additional" interest.

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"BANKS AND CREDIT UNIONS"

Many people save money by obtaining their own loans at credit unions or local banks. This is an easy way to avoid the pressure, hype and hysteria that can occur with dealer financing. Banks and Credit Unions don't play games - Dealers do!

"DEALER FINANCING"

Dealers make hundreds or even thousands of dollars by arranging loans for consumers. They make their profit by getting low interest rates from the lenders and then charging high interest rates to the customer. It may be better to obtain your own financing than deal with the aggravation of negotiating an interest rate and payments at the dealer.

Before you choose between dealer financing and finding your own lender, read the "Credit Application" section of this kit. It can help improve your chances of obtaining financing at the lowest possible interest rate.

If you have a weak credit rating, the dealer may have a better chance of obtaining financing for you than you would on your own. Primarily, this stems from the dealer's ability to send several deals to the bank as a group and negotiate all the deals as a group purchase.

Finance Managers are generally experts at manipulating "people and numbers". While you may have only bought a few cars, they may have sold thousands. They can put on a friendly smile and a computerized explosion of facts and figures that are designed to confuse you and then lead you to the conclusion that "they want you to reach". They will intentionally start out negotiations with payments and figures that are ridiculously high. They expect you to explode, get mad, threaten to walk out etc... After you get mad they begin slowly finding ways to lower your payments (longer term financing, etc...). They continue this process of leading you like cattle to the slaughter (lower payments and higher total cost) until you finally come to an agreement (usually based on payments and little else). Avoid all of this by contacting local banks and verifying interest rates, monthly payments and total costs "before" going to the dealer.

Many Finance Managers avoid giving direct answers to the customer's questions. One of the most commonly asked questions is "What is my interest rate"? A common response is for the Finance Manager to say that they will give you a "Preferred Rate". Surprisingly many people are fooled by this rather obvious ploy and are satisfied to know that they are getting a "Preferred Rate". In reality a "Preferred Rate" is the rate that the "Finance Manager Prefers to Charge You". This rate may be much higher than local bank rates and can cost you thousands of dollars in extra interest charges. The key to avoid being tricked is to ask direct questions and demand direct answers with exact numbers.

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AVOID THE ADDED .9 ON INTEREST RATES

Another trick that Finance Managers like to do, is raise your interest rate without your knowledge. Often the Finance Manager can take hundreds of dollars out of your pocket by adding a small amount to your interest rate. For example, if you and the Finance Manager verbally agree to a finance rate of 8% the Finance Manager might write it on your contract as 8.95%. Many people only look at the number to the left of the decimal point (just like how they disregard the .99 added to the end of most prices at the mall). However small, this number may appear, it may mean hundreds of dollars in extra interest. Be sure to verify the "exact interest rate" to save money.

COMPARE COSTS

If you do consider dealer financing, compare the costs involved by figuring the total cost for each financing plan offered to you by the banks and the dealer. Go with the financing plan that offers the "Lowest Total Cost" while keeping the down payment and monthly payments within your budget.

TOTAL COST

TOTAL COST= Cash Down + (Number of Payments X Amount of Payments)

You may be given a choice between factory to customer rebates or special low interest rates (1.9% - 4.9%). Usually you can't have both. If you take the lower rate you must give the dealer the rebate. The dealer may try manipulating the number of payments, etc... trying to confuse you. They may try to sell you on whichever option provides them with the greatest profit. Deciding is actually very simple. Figure the total cost for both options using the formula above. Select either keeping the rebate or taking the lower interest rate based on the lowest total cost.

Dealers are experts at manipulating numbers. They can show you lower payments by increasing money down, lowering the interest rate or extending the number of months. But not all of these options lower your cost. If the payment goes down but the number of payments goes up, you will actually be paying more in interest.

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NEVER USE A DIP LOAN

If a dealer has trouble getting your entire loan balance financed, they may send you to a second bank for a second (dip) loan to cover the balance. Now you have 2 payments (twice the headache). Most companies that handle dip loans charge extremely high interest rates. Rates range up to 33%. This can cost you hundreds or thousands of dollars in "extra interest". Don't do it!

An additional risk is that you may be unable to make "both" payments on time. What if you can't make both payments on time? You could lose your, car, your job, ruin your credit, etc...

RE-CONTRACTING

Finance managers write loan contracts based on what they think the banks may or may not do. However, they are often wrong. Banks are as different as people and what works one day may not work the next. The finance manager may have you sign a loan contract, send you home in a new car and then apply to the bank for the loan. Normally the bank accepts the loan and everything is okay. However, if the loan is rejected, the dealer will have to re-contract you at a higher interest rate, higher payments, a different bank, require more cash down or cancel the deal altogether if you are unfinancable. If the dealer has to cancel the deal because you are unfinancable, you will have to return the car to the dealership even after you have already showed your new car to all your friends and family. To avoid embarrassment and possible costs for usage or damage to the vehicle, DON'T DRIVE IT HOME UNTIL THE BANK APPROVES THE LOAN!

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FINANCE PURCHASE OFFER

INSTRUCTIONS

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I have decided not to include the chapters on the Credit Application, etc.. simply because they take up a huge amount of space and they are graphics are very hard to reproduce on a website.

I hope this book saves you money, and that you use a little of that money to put a smile on someone's face... Steve Nunnally, aka Baddteddy